Which of the following is NOT a good reason for including a disturbance term in a regression equation?
A) It captures omitted determinants of the dependent variable
B) To allow for the non-zero mean of the dependent variable
C) To allow for errors in the measurement of the dependent variable
D) To allow for random influences on the dependent variable

Question

Quizplus · Accepted Answer

The disturbance term in a regression equation is included to account for omitted variable bias, measurement errors, and random influences on the dependent variable, not to adjust for the non-zero mean of the dependent variable. The mean of the dependent variable is typically accounted for by the intercept term in the regression equation.

Which of the Following Is NOT a Good Reason for Including